SCR 20:1.8. Conflict of interest: prohibited transactions

Conflict of interest: prohibited transactions

(a) A lawyer shall not enter into a business transaction with a client

or knowingly acquire an ownership, possessory, security or other

pecuniary interest adverse to a client unless:

(1) the transaction and terms on which the lawyer acquires the

interest are fair and reasonable to the client and are fully disclosed and

transmitted in writing in a manner that can be reasonably understood by

the client;

(2) the client is advised in writing of the desirability of seeking and

is given a reasonable opportunity to seek the advice of independent legal

counsel on the transaction; and

(3) the client gives informed consent, in a writing signed by the

client, to the essential terms of the transaction and the lawyer's role in the

transaction, including whether the lawyer is representing the client in the

transaction.

(b) A lawyer shall not use information relating to representation of

a client to the disadvantage of the client unless the client gives informed

consent, except as permitted or required by these rules.

(c) A lawyer shall not solicit any substantial gift from a client,

including a testamentary gift, nor prepare an instrument giving the lawyer

or a person related to the lawyer any substantial gift from a client,

including a testamentary gift, except where (1) the client is related to the

donee, (2) the donee is a natural object of the bounty of the client, (3)

there is no reasonable ground to anticipate a contest, or a claim of undue

influence or for the public to lose confidence in the integrity of the bar,

and (4) the amount of the gift or bequest is reasonable and natural under

the circumstances. For purposes of this paragraph, related persons

include a spouse, child, grandchild, parent, grandparent or other relative

or individual with whom the lawyer or the client maintains a close,

familial relationship.

of undue

influence or for the public to lose confidence in the integrity of the bar,

and (4) the amount of the gift or bequest is reasonable and natural under

the circumstances. For purposes of this paragraph, related persons

include a spouse, child, grandchild, parent, grandparent or other relative

or individual with whom the lawyer or the client maintains a close,

familial relationship.

(d) Prior to the conclusion of representation of a client, a lawyer

shall not make or negotiate an agreement giving the lawyer literary or

media rights to a portrayal or account based in substantial part on

information relating to the representation.

(e) A lawyer shall not provide financial assistance to a client in

connection with pending or contemplated litigation, except that:

(1) a lawyer may advance court costs and expenses of litigation,

the repayment of which may be contingent on the outcome of the matter;

and

(2) a lawyer representing an indigent client may pay court costs

and expenses of litigation on behalf of the client.

(f) A lawyer shall not accept compensation for representing a

client from one other than the client unless:

(1) the client gives informed consent or the attorney is appointed

at government expense; provided that no further consent or consultation

need be given if the client has given consent pursuant to the terms of an

agreement or policy requiring an organization or insurer to retain counsel

on the client's behalf;

(2) there is no interference with the lawyer's independence of

professional judgment or with the client-lawyer relationship; and

(3) information relating to representation of a client is protected as

required by SCR 20:1.6.

given if the client has given consent pursuant to the terms of an

agreement or policy requiring an organization or insurer to retain counsel

on the client's behalf;

(2) there is no interference with the lawyer's independence of

professional judgment or with the client-lawyer relationship; and

(3) information relating to representation of a client is protected as

required by SCR 20:1.6.

(g) A lawyer who represents two or more clients shall not

participate in making an aggregate settlement of the claims of or against

the clients, or in a criminal case an aggregated agreement as to guilty or

nolo contendere pleas, unless each client gives informed consent, in a

writing signed by the client. The lawyer's disclosure shall include the

existence and nature of all the claims or pleas involved and of the

participation of each person in the settlement.

(h) A lawyer shall not:

(1) make an agreement prospectively limiting the lawyer's liability

to a client for malpractice unless the client is independently represented

in making the agreement; or

(2) settle a claim or potential claim for such liability with an

unrepresented client or former client unless that person is advised in

writing of the desirability of seeking and is given a reasonable

opportunity to seek the advice of independent legal counsel in connection

therewith; or

(3) make an agreement limiting a person’s right to report the

lawyer's conduct to disciplinary authorities.

(i) A lawyer shall not acquire a proprietary interest in the cause of

action or subject matter of litigation the lawyer is conducting for a client,

except that the lawyer may:

(1) acquire a lien authorized by law to secure the lawyer's fee or

expenses; and

(2) contract with a client for a reasonable contingent fee in a civil

case.

rt the

lawyer's conduct to disciplinary authorities.

(i) A lawyer shall not acquire a proprietary interest in the cause of

action or subject matter of litigation the lawyer is conducting for a client,

except that the lawyer may:

(1) acquire a lien authorized by law to secure the lawyer's fee or

expenses; and

(2) contract with a client for a reasonable contingent fee in a civil

case.

(j) A lawyer shall not have sexual relations with a current client

unless a consensual sexual relationship existed between them when the

client-lawyer relationship commenced.

(1) In this paragraph, "sexual relations" means sexual intercourse

or any other intentional touching of the intimate parts of a person or

causing the person to touch the intimate parts of the lawyer.

(2) When the client is an organization, a lawyer for the

organization (whether inside counsel or outside counsel) shall not have

sexual relations with a constituent of the organization who supervises,

directs or regularly consults with that lawyer concerning the

organization's legal matters.

(k) While lawyers are associated in a firm, a prohibition in the

foregoing pars. (a) through (i) that applies to any one of them shall apply

to all of them.

WISCONSIN COMMENT

This rule differs from the Model Rule in four respects. Paragraph (c) incorporates the

decisions in State v. Collentine, 39 Wis. 2d 325, 159 N.W.2d 50 (1968), and State v.

Beaudry, 53 Wis. 2d 148, 191 N.W.2d 842 (1971). Paragraph (f) adds a reference to

an attorney retained at government expense and retains the "insurance defense"

exception from prior Wisconsin law. But see SCR 20:1.2(e). Paragraph (h) prohibits

a lawyer from making an agreement limiting a person’s right to report the lawyer's

conduct to disciplinary authorities. Paragraph (j)(2) includes language from ABA

Comment [19]

1 N.W.2d 842 (1971). Paragraph (f) adds a reference to

an attorney retained at government expense and retains the "insurance defense"

exception from prior Wisconsin law. But see SCR 20:1.2(e). Paragraph (h) prohibits

a lawyer from making an agreement limiting a person’s right to report the lawyer's

conduct to disciplinary authorities. Paragraph (j)(2) includes language from ABA

Comment [19].

WISCONSIN COMMENT

ABA Comment [8] states that Model Rule 1.8 "does not prohibit a lawyer from

seeking to have the lawyer or partner or associate of the lawyer named as executor of

the client's estate or to another potentially lucrative fiduciary position." This language

is inconsistent with SCR 20:7.3(e), which prohibits a lawyer, at his or her instance,

from drafting legal documents, such as wills or trust instruments, which require or

imply that the lawyer's services be used in relation to that document. For this reason,

ABA Comment [8] is inapplicable.

ABA COMMENT

Business Transactions Between Client and Lawyer

[1] A lawyer's legal skill and training, together with the relationship of trust and

confidence between lawyer and client, create the possibility of overreaching when the

lawyer participates in a business, property or financial transaction with a client, for

example, a loan or sales transaction or a lawyer investment on behalf of a client. The

requirements of paragraph (a) must be met even when the transaction is not closely

related to the subject matter of the representation, as when a lawyer drafting a will for

a client learns that the client needs money for unrelated expenses and offers to make

a loan to the client. The Rule applies to lawyers engaged in the sale of goods or

services related to the practice of law, for example, the sale of title insurance or

investment services to existing clients of the lawyer's legal practice. See Rule 5.7. It

also applies to lawyers purchasing property from estates they represent

hat the client needs money for unrelated expenses and offers to make

a loan to the client. The Rule applies to lawyers engaged in the sale of goods or

services related to the practice of law, for example, the sale of title insurance or

investment services to existing clients of the lawyer's legal practice. See Rule 5.7. It

also applies to lawyers purchasing property from estates they represent. It does not

apply to ordinary fee arrangements between client and lawyer, which are governed by

Rule 1.5, although its requirements must be met when the lawyer accepts an interest

in the client's business or other nonmonetary property as payment of all or part of a

fee. In addition, the Rule does not apply to standard commercial transactions between

the lawyer and the client for products or services that the client generally markets to

others, for example, banking or brokerage services, medical services, products

manufactured or distributed by the client, and utilities' services. In such transactions,

the lawyer has no advantage in dealing with the client, and the restrictions in paragraph

(a) are unnecessary and impracticable.

[2] Paragraph (a)(1) requires that the transaction itself be fair to the client and that its

essential terms be communicated to the client, in writing, in a manner that can be

reasonably understood. Paragraph (a)(2) requires that the client also be advised, in

writing, of the desirability of seeking the advice of independent legal counsel. It also

requires that the client be given a reasonable opportunity to obtain such advice.

Paragraph (a)(3) requires that the lawyer obtain the client's informed consent, in a

writing signed by the client, both to the essential terms of the transaction and to the

lawyer's role

s that the client also be advised, in

writing, of the desirability of seeking the advice of independent legal counsel. It also

requires that the client be given a reasonable opportunity to obtain such advice.

Paragraph (a)(3) requires that the lawyer obtain the client's informed consent, in a

writing signed by the client, both to the essential terms of the transaction and to the

lawyer's role. When necessary, the lawyer should discuss both the material risks of

the proposed transaction, including any risk presented by the lawyer's involvement,

and the existence of reasonably available alternatives and should explain why the

advice of independent legal counsel is desirable. See Rule 1.0(e) (definition of

informed consent).

[3] The risk to a client is greatest when the client expects the lawyer to represent the

client in the transaction itself or when the lawyer's financial interest otherwise poses

a significant risk that the lawyer's representation of the client will be materially limited

by the lawyer's financial interest in the transaction. Here the lawyer's role requires that

the lawyer must comply, not only with the requirements of paragraph (a), but also

with the requirements of Rule 1.7. Under that Rule, the lawyer must disclose the risks

associated with the lawyer's dual role as both legal adviser and participant in the

transaction, such as the risk that the lawyer will structure the transaction or give legal

advice in a way that favors the lawyer's interests at the expense of the client. Moreover,

the lawyer must obtain the client's informed consent. In some cases, the lawyer's

interest may be such that Rule 1.7 will preclude the lawyer from seeking the client's

consent to the transaction.

[4] If the client is independently represented in the transaction, paragraph (a)(2) of this

Rule is inapplicable, and the paragraph (a)(1) requirement for full disclosure is

satisfied either by a written disclosure by the lawyer involved in the transaction or by

the client's independent counsel

e such that Rule 1.7 will preclude the lawyer from seeking the client's

consent to the transaction.

[4] If the client is independently represented in the transaction, paragraph (a)(2) of this

Rule is inapplicable, and the paragraph (a)(1) requirement for full disclosure is

satisfied either by a written disclosure by the lawyer involved in the transaction or by

the client's independent counsel. The fact that the client was independently

represented in the transaction is relevant in determining whether the agreement was

fair and reasonable to the client as paragraph (a)(1) further requires.

Use of Information Related to Representation

[5] Use of information relating to the representation to the disadvantage of the client

violates the lawyer's duty of loyalty. Paragraph (b) applies when the information is

used to benefit either the lawyer or a third person, such as another client or business

associate of the lawyer. For example, if a lawyer learns that a client intends to purchase

and develop several parcels of land, the lawyer may not use that information to

purchase one of the parcels in competition with the client or to recommend that

another client make such a purchase. The Rule does not prohibit uses that do not

disadvantage the client. For example, a lawyer who learns a government agency's

interpretation of trade legislation during the representation of one client may properly

use that information to benefit other clients. Paragraph (b) prohibits disadvantageous

use of client information unless the client gives informed consent, except as permitted

or required by these Rules. See Rules 1.2(d), 1.6, 1.9(c), 3.3, 4.1(b), 8.1, and 8.3.

Gifts to Lawyers

[6] A lawyer may accept a gift from a client, if the transaction meets general standards

of fairness. For example, a simple gift such as a present given at a holiday or as a token

of appreciation is permitted

of client information unless the client gives informed consent, except as permitted

or required by these Rules. See Rules 1.2(d), 1.6, 1.9(c), 3.3, 4.1(b), 8.1, and 8.3.

Gifts to Lawyers

[6] A lawyer may accept a gift from a client, if the transaction meets general standards

of fairness. For example, a simple gift such as a present given at a holiday or as a token

of appreciation is permitted. If a client offers the lawyer a more substantial gift,

paragraph (c) does not prohibit the lawyer from accepting it, although such a gift may

be voidable by the client under the doctrine of undue influence, which treats client

gifts as presumptively fraudulent. In any event, due to concerns about overreaching

and imposition on clients, a lawyer may not suggest that a substantial gift be made to

the lawyer or for the lawyer's benefit, except where the lawyer is related to the client

as set forth in paragraph (c).

[7] If effectuation of a substantial gift requires preparing a legal instrument such as a

will or conveyance the client should have the detached advice that another lawyer can

provide. The sole exception to this Rule is where the client is a relative of the donee.

[8] This Rule does not prohibit a lawyer from seeking to have the lawyer or a partner

or associate of the lawyer named as executor of the client's estate or to another

potentially lucrative fiduciary position. Nevertheless, such appointments will be

subject to the general conflict of interest provision in Rule 1.7 when there is a

significant risk that the lawyer's interest in obtaining the appointment will materially

limit the lawyer's independent professional judgment in advising the client concerning

the choice of an executor or other fiduciary. In obtaining the client's informed consent

to the conflict, the lawyer should advise the client concerning the nature and extent of

the lawyer's financial interest in the appointment, as well as the availability of

alternative candidates for the position

erially

limit the lawyer's independent professional judgment in advising the client concerning

the choice of an executor or other fiduciary. In obtaining the client's informed consent

to the conflict, the lawyer should advise the client concerning the nature and extent of

the lawyer's financial interest in the appointment, as well as the availability of

alternative candidates for the position.

Literary Rights

[9] An agreement by which a lawyer acquires literary or media rights concerning the

conduct of the representation creates a conflict between the interests of the client and

the personal interests of the lawyer. Measures suitable in the representation of the

client may detract from the publication value of an account of the representation.

Paragraph (d) does not prohibit a lawyer representing a client in a transaction

concerning literary property from agreeing that the lawyer's fee shall consist of a share

in ownership in the property, if the arrangement conforms to Rule 1.5 and paragraphs

(a) and (i).

Financial Assistance

[10] Lawyers may not subsidize lawsuits or administrative proceedings brought on

behalf of their clients, including making or guaranteeing loans to their clients for living

expenses, because to do so would encourage clients to pursue lawsuits that might not

otherwise be brought and because such assistance gives lawyers too great a financial

stake in the litigation. These dangers do not warrant a prohibition on a lawyer lending

a client court costs and litigation expenses, including the expenses of medical

examination and the costs of obtaining and presenting evidence, because these

advances are virtually indistinguishable from contingent fees and help ensure access

to the courts. Similarly, an exception allowing lawyers representing indigent clients

to pay court costs and litigation expenses regardless of whether these funds will be

repaid is warranted

penses, including the expenses of medical

examination and the costs of obtaining and presenting evidence, because these

advances are virtually indistinguishable from contingent fees and help ensure access

to the courts. Similarly, an exception allowing lawyers representing indigent clients

to pay court costs and litigation expenses regardless of whether these funds will be

repaid is warranted.

Person Paying for a Lawyer's Services

[11] Lawyers are frequently asked to represent a client under circumstances in which

a third person will compensate the lawyer, in whole or in part. The third person might

be a relative or friend, an indemnitor (such as a liability insurance company) or a co-

client (such as a corporation sued along with one or more of its employees). Because

third-party payers frequently have interests that differ from those of the client,

including interests in minimizing the amount spent on the representation and in

learning how the representation is progressing, lawyers are prohibited from accepting

or continuing such representations unless the lawyer determines that there will be no

interference with the lawyer's independent professional judgment and there is

informed consent from the client. See also Rule 5.4(c) (prohibiting interference with

a lawyer's professional judgment by one who recommends, employs or pays the

lawyer to render legal services for another).

[12] Sometimes, it will be sufficient for the lawyer to obtain the client's informed

consent regarding the fact of the payment and the identity of the third-party payer. If,

however, the fee arrangement creates a conflict of interest for the lawyer, then the

lawyer must comply with Rule 1.7. The lawyer must also conform to the requirements

of Rule 1.6 concerning confidentiality

for another).

[12] Sometimes, it will be sufficient for the lawyer to obtain the client's informed

consent regarding the fact of the payment and the identity of the third-party payer. If,

however, the fee arrangement creates a conflict of interest for the lawyer, then the

lawyer must comply with Rule 1.7. The lawyer must also conform to the requirements

of Rule 1.6 concerning confidentiality. Under Rule 1.7(a), a conflict of interest exists

if there is significant risk that the lawyer's representation of the client will be materially

limited by the lawyer's own interest in the fee arrangement or by the lawyer's

responsibilities to the third-party payer (for example, when the third-party payer is a

co-client). Under Rule 1.7(b), the lawyer may accept or continue the representation

with the informed consent of each affected client, unless the conflict is nonconsentable

under that paragraph. Under Rule 1.7(b), the informed consent must be confirmed in

writing.

Aggregate Settlements

[13] Differences in willingness to make or accept an offer of settlement are among the

risks of common representation of multiple clients by a single lawyer. Under Rule 1.7,

this is one of the risks that should be discussed before undertaking the representation,

as part of the process of obtaining the clients' informed consent. In addition, Rule

1.2(a) protects each client's right to have the final say in deciding whether to accept or

reject an offer of settlement and in deciding whether to enter a guilty or

nolo contendere plea in a criminal case. The Rule stated in this paragraph is a corollary

of both these Rules and provides that, before any settlement offer or plea bargain is

made or accepted on behalf of multiple clients, the lawyer must inform each of them

about all the material terms of the settlement, including what the other clients will

receive or pay if the settlement or plea offer is accepted. See also Rule 1.0(e)

(definition of informed consent)

paragraph is a corollary

of both these Rules and provides that, before any settlement offer or plea bargain is

made or accepted on behalf of multiple clients, the lawyer must inform each of them

about all the material terms of the settlement, including what the other clients will

receive or pay if the settlement or plea offer is accepted. See also Rule 1.0(e)

(definition of informed consent). Lawyers representing a class of plaintiffs or

defendants, or those proceeding derivatively, may not have a full client-lawyer

relationship with each member of the class; nevertheless, such lawyers must comply

with applicable rules regulating notification of class members and other procedural

requirements designed to ensure adequate protection of the entire class.

Limiting Liability and Settling Malpractice Claims

[14] Agreements prospectively limiting a lawyer's liability for malpractice are

prohibited unless the client is independently represented in making the agreement

because they are likely to undermine competent and diligent representation. Also,

many clients are unable to evaluate the desirability of making such an agreement

before a dispute has arisen, particularly if they are then represented by the lawyer

seeking the agreement. This paragraph does not, however, prohibit a lawyer from

entering into an agreement with the client to arbitrate legal malpractice claims,

provided such agreements are enforceable and the client is fully informed of the scope

and effect of the agreement. Nor does this paragraph limit the ability of lawyers to

practice in the form of a limited-liability entity, where permitted by law, provided that

each lawyer remains personally liable to the client for his or her own conduct and the

firm complies with any conditions required by law, such as provisions requiring client

notification or maintenance of adequate liability insurance

f the agreement. Nor does this paragraph limit the ability of lawyers to

practice in the form of a limited-liability entity, where permitted by law, provided that

each lawyer remains personally liable to the client for his or her own conduct and the

firm complies with any conditions required by law, such as provisions requiring client

notification or maintenance of adequate liability insurance. Nor does it prohibit an

agreement in accordance with Rule 1.2 that defines the scope of the representation,

although a definition of scope that makes the obligations of representation illusory

will amount to an attempt to limit liability.

[15] Agreements settling a claim or a potential claim for malpractice are not prohibited

by this Rule. Nevertheless, in view of the danger that a lawyer will take unfair

advantage of an unrepresented client or former client, the lawyer must first advise

such a person in writing of the appropriateness of independent representation in

connection with such a settlement. In addition, the lawyer must give the client or

former client a reasonable opportunity to find and consult independent counsel.

Acquiring Proprietary Interest in Litigation

[16] Paragraph (i) states the traditional general rule that lawyers are prohibited from

acquiring a proprietary interest in litigation. Like paragraph (e), the general rule has

its basis in common law champerty and maintenance and is designed to avoid giving

the lawyer too great an interest in the representation. In addition, when the lawyer

acquires an ownership interest in the subject of the representation, it will be more

difficult for a client to discharge the lawyer if the client so desires. The Rule is subject

to specific exceptions developed in decisional law and continued in these Rules. The

exception for certain advances of the costs of litigation is set forth in paragraph (e)

representation. In addition, when the lawyer

acquires an ownership interest in the subject of the representation, it will be more

difficult for a client to discharge the lawyer if the client so desires. The Rule is subject

to specific exceptions developed in decisional law and continued in these Rules. The

exception for certain advances of the costs of litigation is set forth in paragraph (e). In

addition, paragraph (i) sets forth exceptions for liens authorized by law to secure the

lawyer's fees or expenses and contracts for reasonable contingent fees. The law of

each jurisdiction determines which liens are authorized by law. These may include

liens granted by statute, liens originating in common law and liens acquired by

contract with the client. When a lawyer acquires by contract a security interest in

property other than that recovered through the lawyer's efforts in the litigation, such

an acquisition is a business or financial transaction with a client and is governed by

the requirements of paragraph (a). Contracts for contingent fees in civil cases are

governed by Rule 1.5.

Client-Lawyer Sexual Relationships

[17] The relationship between lawyer and client is a fiduciary one in which the lawyer

occupies the highest position of trust and confidence. The relationship is almost

always unequal; thus, a sexual relationship between lawyer and client can involve

unfair exploitation of the lawyer's fiduciary role, in violation of the lawyer's basic

ethical obligation not to use the trust of the client to the client's disadvantage. In

addition, such a relationship presents a significant danger that, because of the lawyer's

emotional involvement, the lawyer will be unable to represent the client without

impairment of the exercise of independent professional judgment

itation of the lawyer's fiduciary role, in violation of the lawyer's basic

ethical obligation not to use the trust of the client to the client's disadvantage. In

addition, such a relationship presents a significant danger that, because of the lawyer's

emotional involvement, the lawyer will be unable to represent the client without

impairment of the exercise of independent professional judgment. Moreover, a blurred

line between the professional and personal relationships may make it difficult to

predict to what extent client confidences will be protected by the attorney-client

evidentiary privilege, since client confidences are protected by privilege only when

they are imparted in the context of the client-lawyer relationship. Because of the

significant danger of harm to client interests and because the client's own emotional

involvement renders it unlikely that the client could give adequate informed consent,

this Rule prohibits the lawyer from having sexual relations with a client regardless of

whether the relationship is consensual and regardless of the absence of prejudice to

the client.

[18] Sexual relationships that predate the client-lawyer relationship are not prohibited.

Issues relating to the exploitation of the fiduciary relationship and client dependency

are diminished when the sexual relationship existed prior to the commencement of the

client-lawyer relationship. However, before proceeding with the representation in

these circumstances, the lawyer should consider whether the lawyer's ability to

represent the client will be materially limited by the relationship. See Rule 1.7(a)(2).

[19] When the client is an organization, paragraph (j) of this Rule prohibits a lawyer

for the organization (whether inside counsel or outside counsel) from having a sexual

relationship with a constituent of the organization who supervises, directs or regularly

consults with that lawyer concerning the organization's legal matters.

Imputation of Prohibitions

relationship. See Rule 1.7(a)(2).

[19] When the client is an organization, paragraph (j) of this Rule prohibits a lawyer

for the organization (whether inside counsel or outside counsel) from having a sexual

relationship with a constituent of the organization who supervises, directs or regularly

consults with that lawyer concerning the organization's legal matters.

Imputation of Prohibitions

[20] Under paragraph (k), a prohibition on conduct by an individual lawyer in

paragraphs (a) through (i) also applies to all lawyers associated in a firm with the

personally prohibited lawyer. For example, one lawyer in a firm may not enter into a

business transaction with a client of another member of the firm without complying

with paragraph (a), even if the first lawyer is not personally involved in the

representation of the client. The prohibition set forth in paragraph (j) is personal and

is not applied to associated lawyers.